Question 1

A price-taking firm is one that forces consumers to take whatever price the firm wishes.

Accepted Answer

A) True 
 B)False

Question 2

Exhibit 6-8  
-Refer to Exhibit 6-8. Total industry profits are illustrated by

Accepted Answer

A) area B. 
B) nothing; nothing in the figure illustrates industry profits. 
C) area C. 
D) area A. 
E) area A + B. 
A) area B. 
B) nothing; nothing in the figure illustrates industry profits. 
C) area C. 
D) area A. 
E) area A + B.

Question 3

Exhibit 6-5  
-Refer to Exhibit 6-5. Profits become negative when the firm produces

Accepted Answer

A) between Q1 and Q2. 
B) between Q2 and Q3. 
C) between Q3 and Q4. 
D) more than Q4. 
E) nothing at all. 
A) between Q1 and Q2. 
B) between Q2 and Q3. 
C) between Q3 and Q4. 
D) more than Q4. 
E) nothing at all.

Question 4

A competitive market is one in which many firms compete for customers and end up charging a common market price.

Accepted Answer

A) True 
 B)False

Question 5

The competitive firm sets output to equal output price and marginal cost.

Accepted Answer

A) True 
 B)False

Question 6

An individual firm in a competitive market

Accepted Answer

A) decides, given the market price, how much to produce and sell. 
B) has no control over the price or the quantity it produces and sells. 
C) takes the market-determined amount it should sell as given, and then, based on this amount, determines what price to charge. 
D) decides what price to charge and how much to produce and sell. 
E) has control over the price but not the quantity to produce and sell. 
A) decides, given the market price, how much to produce and sell. 
B) has no control over the price or the quantity it produces and sells. 
C) takes the market-determined amount it should sell as given, and then, based on this amount, determines what price to charge. 
D) decides what price to charge and how much to produce and sell. 
E) has control over the price but not the quantity to produce and sell.

Question 7

Which of the following statements is true for any profit-maximizing firm?

Accepted Answer

A) The firm will produce at the level of output where price equals marginal revenue. 
B) The firm will produce at the level of output where price equals marginal cost. 
C) The firm will produce at the level of output where marginal revenue equals marginal cost. 
D) The firm will produce at the level of output where marginal revenue is maximized. 
E) The firm will produce at the level of output where marginal cost is minimized. 
A) The firm will produce at the level of output where price equals marginal revenue. 
B) The firm will produce at the level of output where price equals marginal cost. 
C) The firm will produce at the level of output where marginal revenue equals marginal cost. 
D) The firm will produce at the level of output where marginal revenue is maximized. 
E) The firm will produce at the level of output where marginal cost is minimized.

Question 8

The firm's supply curve is its marginal cost curve.

Accepted Answer

A) True 
 B)False

Question 9

Marginal product decreases as labor increases because marginal cost is rising.

Accepted Answer

A) True 
 B)False

Question 10

The difference between the market price of a good and a producer's marginal cost of every unit of the good is called

Accepted Answer

A) consumer surplus. 
B) producer surplus. 
C) marginal surplus. 
D) excess supply. 
E) market surplus. 
A) consumer surplus. 
B) producer surplus. 
C) marginal surplus. 
D) excess supply. 
E) market surplus.

Question 11

The owner often also acts as the manager in

Accepted Answer

A) sole proprietorships. 
B) all businesses. 
C) corporations. 
D) nonprofit firms. 
E) government enterprises. 
A) sole proprietorships. 
B) all businesses. 
C) corporations. 
D) nonprofit firms. 
E) government enterprises.

Question 12

Why is a monopoly a price-maker?

Accepted Answer

A monopoly is a single produce

Question 13

A firm in a competitive market can control the price it charges its buyers.

Accepted Answer

A) True 
 B)False

Question 14

Define diminishing returns in production and illustrate it with the graph of a production function.

Accepted Answer

Diminishing returns occur when an additi

Question 15

If the market price of a good is $3, then a profit-maximizing competitive firm will produce

Accepted Answer

A) after its marginal cost exceeds $3. 
B) until its marginal cost reaches $3. 
C) after its marginal revenue exceeds $3. 
D) until its marginal revenue reaches $3. 
E) nothing at all. 
A) after its marginal cost exceeds $3. 
B) until its marginal cost reaches $3. 
C) after its marginal revenue exceeds $3. 
D) until its marginal revenue reaches $3. 
E) nothing at all.

Question 16

Exhibit 6-5  
-Marginal revenue is the change in

Accepted Answer

A) total profit from changing output by one unit. 
B) total revenue as a result of changing output by one unit. 
C) average revenue as a result of changing output by one unit. 
D) total revenue as a result of changing input by one unit. 
E) total cost as a result of changing output by one unit. 
A) total profit from changing output by one unit. 
B) total revenue as a result of changing output by one unit. 
C) average revenue as a result of changing output by one unit. 
D) total revenue as a result of changing input by one unit. 
E) total cost as a result of changing output by one unit.

Question 17

What are the two primary inputs in today's production? Which one of these inputs is variable and which one is fixed?

Accepted Answer

The primary inputs are labor a

Question 18

In a market diagram, producer surplus is shaped like a triangle bounded by the vertical axis, the demand curve, and the supply curve.

Accepted Answer

A) True 
 B)False

Question 19

Suppose a firm receives $10 for selling one additional unit of its product but that additional unit costs the firm $1 to produce. The producer surplus for the additional unit of product is

Accepted Answer

A) $1. 
B) $5.5. 
C) $9. 
D) $11. 
E) $110. 
A) $1. 
B) $5.5. 
C) $9. 
D) $11. 
E) $110.

Question 20

How much a firm changes its output in response to a price change is captured by the firm's

Accepted Answer

A) production function. 
B) cost function. 
C) function of diminishing returns. 
D) supply curve. 
E) demand curve. 
A) production function. 
B) cost function. 
C) function of diminishing returns. 
D) supply curve. 
E) demand curve.

Exam 6: The Supply Curve and the Behavior of Firms

A price-taking firm is one that forces consumers to take whatever price the firm wishes.

Exhibit 6-8 -Refer to Exhibit 6-8. Total industry profits are illustrated by

Exhibit 6-5 -Refer to Exhibit 6-5. Profits become negative when the firm produces

A competitive market is one in which many firms compete for customers and end up charging a common market price.

The competitive firm sets output to equal output price and marginal cost.

An individual firm in a competitive market

Which of the following statements is true for any profit-maximizing firm?

The firm's supply curve is its marginal cost curve.

Marginal product decreases as labor increases because marginal cost is rising.

The difference between the market price of a good and a producer's marginal cost of every unit of the good is called

The owner often also acts as the manager in

Why is a monopoly a price-maker?

A firm in a competitive market can control the price it charges its buyers.

Define diminishing returns in production and illustrate it with the graph of a production function.

If the market price of a good is $3, then a profit-maximizing competitive firm will produce

Exhibit 6-5 -Marginal revenue is the change in

What are the two primary inputs in today's production? Which one of these inputs is variable and which one is fixed?

In a market diagram, producer surplus is shaped like a triangle bounded by the vertical axis, the demand curve, and the supply curve.

Suppose a firm receives $10 for selling one additional unit of its product but that additional unit costs the firm $1 to produce. The producer surplus for the additional unit of product is

How much a firm changes its output in response to a price change is captured by the firm's

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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